Meta

City centre parking rates: economic literacy versus special pleading

By Peter Nunns, on July 13th, 2014

This weekend the NZ Herald’s motoring correspondent Matt Greenop published an article denouncing the “insult” of parking fees. Now, at Transportblog we’re always up for a good debate over the merits of different parking policies, but this doesn’t add much to the conversation:

Parking used to be a doddle. Now it’s just another cost of car ownership that makes us feel we’ve committed a heinous crime against humanity by daring to buy and use our own vehicle.

Every little bit that gets added on to the cost of driving a car in the city is an insult — and the next insult we’re facing is another hike in parking fees.

From an economic perspective, this is a totally absurd statement. It completely ignores the supply and demand dynamics at play in urban areas. Parking takes up space, and as anyone who’s been downtown in the last decade has noticed, there’s a limited amount of space in the city centre. Demand for commercial and residential space in the city centre is increasing. The residential population tripled from 10,200 to 31,300 between the 2001 and 2013 Censuses; over the same time period, employment in the city centre rose by a quarter, from 81,000 to 100,100.

Using prices to manage demand for scarce resources is an efficient and sensible response. This is basic Econ 101 material, and we accept it in most areas of life. City centre office space is priced, and priced highly, due to the fact that a lot of people want to locate there.

It would be ridiculous if companies leasing space in the city centre to complain that a rent increase was an “insult”. And if they insisted on paying no rent at all, we’d recognise it as special pleading for a market-distorting subsidy.

It’s the exact same thing with parking. Essentially, the Herald’s using emotive language to demand a costly, distortionary subsidy for a small number of people.

If the Herald wants to avoid printing such embarrassing nonsense in the future, I strongly recommend that they run their articles by an economist first.

What an idiot. Spare a thought for our parking wardens, who have to put up with abuse from morons like this every day. Matt Greenop is not only economically illiterate – he fails to comprehend that without parking fees and restrictions the city would immediately grind to a halt.

Playing the devil’s advocate here – is it inconsistent to talk about parking and roads and supply and demand, and justify higher parking prices on that basis…and then say the city should expand and expand public transport for which every journey is about 50% ratepayer subsidised, or even more if you add in capital expenditure to operating expenditure? Maybe (just like public transport) providing parking at below-market rates has ‘wider economic benefits’, promotes public welfare, etc.

Ben – I’m glad you raised that question as I think it’s an important one. I am convinced that transport infrastructure (whether roads or PT) is a public good. As a result, there’s a case for public investment. That’s why we provide a 50% subsidy for public transport trips, and why local roads are funded 50% out of road taxes and 50% out of rates. We could quibble about the funding ratios, but this basically seems like a reasonable situation.

Historically, we have also subsidised parking provision. This has taken place in two ways. First, councils have constructed parking buildings and on-street parking and made it available at below-market rates. For example, AT’s parking buildings in the CBD charge lower daily rates than privately-owned ones. Second, and more importantly, council’s have regulated for minimum parking ratios – effectively freighting the cost of providing parking onto the private sector. This has come at a significant cost in terms of land and money, and led to an oversupply of parking in many areas of the city. Due to the regulated oversupply, parking appears to be free in many areas.

My point is that parking competes for land with other activities that do provide an economic return (i.e. dwellings, office buildings, shops). It is also complementary to those activities, in that it enables people to access them. To the extent that the former is true, unpriced parking carries an economic cost, as it prevents people renting land out. To the extent that the latter is true, people will be willing to pay to use (or provide) parking, as they value being able to access places by car. Hence the recommendation to use market mechanisms to manage the supply and allocation of parking.

For the sake of argument – no better or worse than I feel about them deriving private benefit from public transport. Either way they consume a subsidised public resource for private benefit. If you’re going to talk about the importance of “supply and demand dynamics”, perhaps public carparking and public transport should be receiving an equal public subsidy (or none at all) and we can see which are more popular?

But Ben all modes are subsidised now. Driving and parking is and always has been hugely subsidised as these amenities are funded through Council rates…. this is because transport infrastructure of all kinds have economic benefits that are hard for them to capture as income.

The argument is about the level of subsidy and where is the highest value for our subsidy. For the last sixty+ years we have uncritically sunk huge sums to promote private driving and parking as that has been considered as nothing but a public good. To say that this is contestable is an understatement. Particularly as anything un- or underpriced leads to distortion, and when that thing also has many dis-benefits as well as benefits then that underpricing and subsequent distortion is then potentially very damaging.

Can of worms here, we Waihekeans and all travelers to Waiheke have apparently been paying some sort of Wharf tax or levy for years, supposedly for the upkeep and improvement of our Matiatia terminal.

From amalgamation with Auckland City, then he super city council, last I heard no one in Council or AT knew where that money was. I suppose we naively thought that we might get a say in how it is spent.

So us on Waiheke (and we’re not all millionaires) have fullers monopoly, its exemption from reporting properly to AT, and we have been paying a levy for decades that seems to have disappeared into a beurocratic black hole.

Don, public transport is a public good and there’s no need for mode bias in the subsidies. With the ferries, and with the HOP card, it would be an absolute doddle.

For example, say you wanted to meet a target of 50% fare recovery like for busses and trains. All you would need to do charge $2.10 for each ferry trip, then pay the current $4.20 to the service operator (Fullers). Job done.

Also it’s well past the time to get rid of the departure taxes for the ferry terminals. They aren’t applied to users of bus and train terminals so why apply them to ferry terminal users? Again, a change that would introduce fairness and take about ten minutes to implement.

Ben, you do realise that by saying ‘public carparking’ you are also discussing the on street parking all over Auckland? Excellent. We fully need this discussion when talking subsidies. Because there is 5 to 6 meters width on pretty much every street in Auckland that could be repurposed.

When people start using words like “an insult” and “outrageous” to describe policy, it’s often because they can’t come up with a rational argument to clearly justify or even articulate their opposition.

This is such a dumb argument when looking at it in the context of Auckland property prices.

Which formed the basis of my comment posted below that article:

“So, why should the free market – otherwise the basis of our economy – not apply to car parking?

When nearly everybody drives, you start to fail to see the forest for the trees – in this case, the huge cost of land used to park cars.

Think of your own car. Now think of where you park it at home and the land area dedicated to both storing it where you park it overnight (8 square metres?), and the land area dedicated to manoeuvring it into position (your driveway – probably at least another 10 square metres) as well as the part of the road that you can’t parallel park another car because your driveway is there (another 10 square metres).

That’s 28 square metres that is dedicated 24/7 to your car. And that’s just your home.

Add to that your work carpark (another 8 sqm) and the share of lane to manoeuvre you car in and out of that spot (another 8 sqm minimum). We’re up to 44 square metres just for your car and the two parks you put it in most often. And that’s just one car!

Now as we all know, land in Auckland is expensive. With the sheer land area we dedicate to storing our cars (let alone moving them!), are we using that land space wisely? I think not. We need to do this better.”

I’m kicking myself for missing my closing sentence out. It should have been “Making people pay a fair rate for the land their car takes up is a fair start”.

Nice! But I don’t see it below the article. I guess the Herald is selective in what comments it publishes…

Here’s my reply, just in case it isn’t approved:

> What an entitled load of tripe. Matt Greenop completely fails to understand supply and demand: Land in the CBD is a limited resource, and comes with an opportunity cost (land used for car storage can’t be used for more productive things). As demand for parking grows, and supply does not, prices will naturally rise. If all parking throughout the city were free, you’d find it even harder to find a spot. Pricing manages demand.

> What does it tell you that private car park operators are charging more than AT? To me, it says that AT are subsidizing your choice to bring your car into the city, and if they weren’t providing parking, you’d have to pay even more.

> If you don’t want to use public transport, that’s fine – but at least realize that your choice to drive also carries costs. Isn’t “user pays” the mantra that car lovers bang on about when decrying public transport subsidies?

> If you don’t want to use public transport, that’s fine – but at least realize that your choice to drive also carries costs. Isn’t “user pays” the mantra that car lovers bang on about when decrying public transport subsidies?

Brilliant summary. If you don’t mind Rob, may I borrow that line in my comment on Matt Greenop’s literary offal?

Glad you like it, and you’re welcome to use it – just bear in mind that this is a comment I made on that article (my comment hasn’t been published yet though). It’s probably best not to have the exact same words in two different comments

But sadly, it is nothing more than we have come to expect from Matt Greenop. His columns have devolved from tripe into slime.

That the Herald sees fit to publish such ridiculous sprays speaks volumes about its own gutter-crawling standards. I used to enjoy reading the Herald, including the motoring section. This sort of muck is just an insult to readers.

To be fair on The New Zealand Herald, they just lifted this from any one of the publications which are carrying the story, worldwide.

Q : Why employ your own journalists, when what happens on the other side of the world, is more important than “kicking the living daylights” out of the government for allowing traffic to kill us with diesel?

Theory : Auckland doesn’t need more trains and we save money this way. We’ve considered the evidence and it is conclusive. Soon there won’t be enough people to economically justify having them at all.

I liked this one: “Then, if you’re lucky enough to spot a spot, you’ve got to try to squeeze your vehicle into it. Carparks used to be a standard(ish) size. They’re shrinking as quickly as car owners’ wallets are.”

Despite the fact that as a motoring writer, he should know it is cars getting bigger. The BMW 3 series is now bigger than the 5 series use to be so they have had to introduce the 1 series, which is now bigger than the 3 series use to be. LIkewise, the Audi A4 is the size of the old Audit A6 and the Holden Cruize is about the size of the old Holden Commodore.

Or more a much more obvious example, take a look at the old and new mini. The old mini was tiny, the new mini has the same wheel base as the Land Rover discovery.

Cars use to weight under a Tonne, now they can weigh over 2 Tonnes. 15 inch mag wheels use to be huge, now cars come factory with 18 inch mags and to pimp your ride, you have to dump it onto 20’s or 22’s! My new family car has bigger, wide tyres (and more power) that the Ferrari Magnum PI use to drive around in. Madness!

If parking was in a “free market” there would be no requirement for any property owner to provide parking spaces in any district plan. I haven’t heard any neo-liberals demanding all parking requirements be removed from district plans because they are a socialist impingement on the rights of a property owner to do whatever he wants to do with his property, but it is as logical as demanding tax cuts.

A developer would provide spaces if the market showed that the spaces were required to sell a property. I suspect that most buildings in commercial centres and a lot of dwellings would be constructed without a parking space.

Therefore anyone wanting to park a car close to a building would need to use the kerb. The council could then either really ramp up the cost of kerb side parking or eliminate kerb-side parking all-together. The demand for parking would presumably make parking buildings a commercially viable project in commercial centres.

I suspect after a few years of having no parking requirement in the district plan the charges that Matt Greenop is moaning and whinging about would be looked back on as being in the “good old days”.

Is there a place to make submissions on the AT discussion document on parking proposals. I feel that the proposed lower cost first 3 hours with prices rising after that with the aim of having 15% free spaces available is the right way to go and using pricing as the means of achieving that is a great start.

The use of the carriageway for parking means that the cost of the parking infrastructure is much higher than it needs to be. It would be nice if the carriageways in the city were limited to say 2.8metres per lane and the balance either used to incorporate cycle lanes or pedestrians. This would have the effect of reducing speeds as drivers are much more aware of the proximity to other vehicles in the narrower lanes.

When we’ve had our fun flaying this sort of nonsense, let’s remember that tabloid journalists write to appeal to a constituency. There are plenty of people out there who would agree with the journalist. We should be trying to talk to them without being condescending.

Debates like this occur because people have inconsistent views (that is, what a rational economist would call inconsistent) on what things should be regarded as public services, and what should be left to the market. Most people don’t mind paying a few dollars to enter the public swimming pool; but most would object mightily to paying to enter the public library.

Clearly many people who have grown up with ubiquitous free parking think of it as a public service more like the library than the swimming pool.

I see two ways to frame this debate:

1. Treat it as economics 101: ‘car parking is a cost [opportunity cost of the land occupied by the car park] – it’s only fair that the beneficiary should pay.’ I can’t see this having much traction with entitled whingers.

2. Focus on the fact that the whingers usually say that carparking is too scarce AND too expensive. Point out that it’s contradictory to complain about both these things – if parking were cheaper, there would be more competition for it. Sympathise with HALF their complaint. Say, ‘of course you should be able to get a park – and the best way to do it is to let the price float until supply matches demand.’

Then at least you might sow a seed of doubt as they have to think about which of their whinges is more important to them.

Something even more basic – Econ 001 – that may help would be to change the language from parking fee to rent. When you pay to park you’re paying rent on a small piece of real estate, whether owned publicly or privately. Then the law of supply and demand takes over and the rent goes up or down accordingly. And why should everyone be exempt from paying rent to store their car somewhere, when they have to pay rent to store anything else? They shouldn’t.